Export Diversification and Global Value Chains, based on OECD Business for Development 2007

Transcription

1 TRADE AND DEVELOPMENT BOARD COMMISSSION ON ENTERPRISE, BUSINESS FACILITATION AND DEVELOPMENT Expert Meeting on "ENHANCING THE PARTICIPATION OF SMALL AND MEDIUM- SIZED ENTERPRISES IN GLOBAL VALUE CHAINS" Geneva, October 2007 PAPER SUBMITTED TO THE EXPERT MEETING* Export Diversification and Global Value Chains, based on OECD Business for Development 2007 by Federico BONAGLIA OECD Development Centre *The views expressed are those of the author and do not necessarily reflect the views of the UNCTAD

2 Expert Meeting on "ENHANCING THE PARTICIPATION OF SMALL AND MEDIUM- SIZED ENTERPRISES IN GLOBAL VALUE CHAINS" Geneva, 18 October 2007 Export Diversification and Global Value Chains Based on OECD Business for Development 2007 by Federico BONAGLIA OECD Development Centre The views expressed are those of the author and do not necessarily reflect the views of the UNCTAD

3 2 Export Diversification and Global Value Chains 1 Stylised facts and motivation 2 Upgrading challenges in GVCs 3 Beyond apparel and cars: Evidence from four GVCs 4 Conclusions

4 3 Stylised facts. The changing geography of trade and investment Fragmentation of production associated with larger participation of developing country firms in GVCs (about 40% of world trade in parts and components) Role of intermediary (e.g. Retailers) in structuring GVC and facilitating global matching (e.g. ROK and Taipei, see Feenstra and Hamilton, 2006 ) New actors Pocket MNEs (e.g. Italy, Mexico), born-global SMEs Emerging Market MNEs taking lead role in GVCs

5 4 computer and i-pod Modular product architectures and global innovation networks Source: Dedrick and Kraemer (2007), Globalization of Innovation: The Personal Computing Industry

6 5 Developing countries are moving up the technology ladder There is much more variety in China s export mix than economic models would predict

7 6 Motivations Increasing involvement of developing country producers into global value chains (GVC) Are developing countries producers destined to remain assemblers at the bottom of the GVC? Move beyond cars and clothing What can be learned from developing-country firms that successfully internationalised, including through outward-fdi?

8 7 Export Diversification and Global Value Chains 1 Stylised facts and motivation 2 Upgrading challenges in GVCs 3 Beyond apparel and cars: Evidence from four GVCs 4 Conclusions

9 8 Upgrading challenges in global value chains obstacles, opportunities and risks Obstacles to upgrading and internationalisation lack of resources & latecomer status small local markets & absence of sophisticated users unfriendly business environments remoteness from the main sources of technology and R&D Participation in GVCs offers opportunities Access to export markets Capacity building and supplier-oriented upgrading But there are risks too Concentration of buyers vs. expansions of the pool of suppliers Unequal powers and distributions of rents

10 9 Upgrading challenges in global value chains Evidence Lead firms control key assets and functions. Suppliers upgrading often limited to less rewarding functions. Transition from OEM to ODM but few producers become OBM. Networks of firms more conducive to functional upgrading GVC governance structure and opportunities for upgrading are dynamic & influenced by both exogenous factors (regulatory environment and consumers preferences) endogenous factors (corporate strategic choices by lead firms and suppliers)

11 10 Export Diversification and Global Value Chains 1 Stylised facts and motivation 2 Upgrading challenges in GVCs 3 Beyond apparel and cars: Evidence from four GVCs 4 Conclusions

12 11 Beyond cars and apparel White goods Regional jets Animation Tourism Agro-food China, Mexico, Turkey Brazil, China Philippines Mozambique Ghana, Mali, Senegal, Tanzania, Zambia

13 12 Regional Jets Brazilian regional jets industry competes with OECD producers

14 13 White goods: fragmentation & OEM become OBM Chinese motor Mexican wiring American dishwater

15 14 Beyond cars and apparel White goods Relatively similar products + mature technologies Scale matters, Innovation is largely driven by energy & environmental regulations + domotics National preferences + transport costs trade is still very much regional brands differ Experience goods Investment in marketing and design to retain consumers loyalty

16 15 Beyond cars and apparel White goods Relocating production to emerging markets to tap their growing demand and exploiting lower production cost the industrial cluster follows (e.g. Merloni in Russia) Shorter product cycles + overlapping product generations + market polarisation close supplier relations in product innovation and consolidation of brand portfolio Production in Asia (>30%), Europe (~30%) and NAFTA (25%) Major players: Successive waves of M&A (brand acquisition) Only Whirlpool, GE, and Electrolux have a truly global orientation Regional strong players, sometimes with global ambitions (Haier)

17 16 Arcelik, Haier, Mabe From OEM to multinational OBM Understanding the internationalisation experience of three emerging country- MNEs: Arcelik(Turkey), Haier (Mabe) Mabe (Mexico) Two become strong regional players, one has global ambitions

18 17 Transformation of Arçelik from a domestic player to an International player: 3 rd largest producer in Europe - Increase in international sales ratio from 16% to 39% 1999 International 16% 2005 International 39% Turkey 84% Turkey 61% Source: Company data

19 18 Arcelik, Haier, Mabe From OEM to multinational OBM Link, learn and leverage: strategic partnerships to acquire technology and knowhow Technological and organisational innovation (R&D centres and focus on quality) Accelerated internationalisation through export and foreign acquisitions to enter markets, acquire brands and assets Marketing and branding to build reputation

20 19 Beyond cars and apparel Tourism Tourism industry: a GVC where airlines, travel agencies and hotel groups have a lead role Diversification of tourism experience: Bringing new resources and people to places hitherto outside the map of world travelers Importance of national branding (image) and complementary services Benefits for local economy? Local content?

21 20 Tourism value-chain in MOZ Source: Business for Development 2007 (ch. 2), OECD Development Centre

22 21 Tourism in Mozambique Unexploited potential Abundant and varied tourist resources, but still small The development of the industry is hampered by Lack of institutional support and branding Difficult business environment Lack of complementary services (also due to lack of competition) and infrastructure

23 22 Export Diversification and Global Value Chains 1 Stylised facts and motivation 2 Upgrading challenges in GVCs 3 Beyond apparel and cars: Evidence from four GVCs 4 Conclusions

24 23 Conclusions Evidence from case studies Opportunities exist for developing-country firms, even outside traditional low-tech industries. Companies succeed when they treat global competition as an opportunity and leverage on their partnerships. Linking up to lead firms in GVC can support access to markets and upgrading, but only to a certain extent.

25 24 Conclusions Implications for policy Improving the domestic business climate (contract enforcement, corporate governance, competition policy) is very important, but may not be enough A new industrial policy? Value chain analysis can be a useful tool to identify binding constraints (including outside the sector), trade-off, involve the key actors and anticipate change. Support expansion of firms capabilities and develop business linkages. No picking winners, but transparent, accountable mechanisms, allowing experimentation (with sunset clause).

26 25 Thank you! For more information: